FTZ tax: Aviation stakeholders fear investment, technology transfer hindrance

As the Federal Government plans imposition of tax on the Free Trade Zones (FTZs) in the country, players in the zone in the Nigerian aviation industry fear that foreign investment and technology transfer will be hindered.

They also hold that the taxation may lead to job losses.

There are two companies in the Nigerian aviation industry operating in the Free Trade Zone (FTZ) area.

The companies are ExecuJet Aviation Nigeria and the Nigerian Aviation Handling Company (NAHCo) Free Zone (NFZ). The two are located within the Murtala Muhammed Airport (MMA), Lagos.

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ExecuJet Aviation Nigeria’s FTZ, allows the company to pass savings on to customers by exempting parts and services from the Value Added Tax (VAT) and customs charges, while for NAHCO, the FTZ was created to provide cost-effective storage, logistics and operational services that accelerate speed to business and sustain competitive advantage for companies that need to expand their trade activities in Nigeria.

The Free Trade Zones are created to encourage economic activity and employment by reducing trade barriers and regulations.

Sam Iwuajoku, Chairman, Quits Aviation Services Limited, operators of ExecuJet facility in Nigeria, feared that the decision of the Federal Government to impose tax on FTZs may on the long run spell doom for the nation’s economy.

Iwuajoku explained that the creation of the free trade zone in the sector had attracted investors to the country, but expressed worry that policy summersault by the government was killing businesses and investments not only in the sector, but in the country at large.

“Government policy summersaults are driving away companies in Nigeria. For instance, look at Lever Brothers Company, they moved to Ghana because we are doing backward integration. What about the textile industry? Where are the companies today?” He queried.

Iwuajoku, also decried that the imposition of such tax would affect transfer of technology, investment opportunities and employment of qualified Nigerians, adding that some maintenance carried out on aircraft may be impossible again.

The Chairman of ExcuJet warned that with the implementation of the new regime, the company may be compelled to downsize at least 80 per cent of its current workforce.

Currently, ExecuJet Aviation Nigeria employs about 160 workers, mainly professionals.

He also said that the government would be working at cross purposes with the other global economies with the imposition of tax in FTZs, calling on the government to reverse its decision.

He said: “Once the government comes up with this planned new tax, because we too don’t charge tax when we work on your equipment, there is no point for airline operators to come to Nigeria for the maintenance of their equipment again. Why will I bring my aircraft here when I can get the same rates in London, Dubai or somewhere else without that tax?

“Government should be careful, business aviation is very sensitive and the margin is very thin. I keep on warning them or else, the airlines will start cutting corners and there will be accidents. The government should leave the sector alone.

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“Since Nigeria joined the free trade zone, people have started bringing their equipment that we never had. Leading aircraft manufacturers are now domiciled here, having their authorised service centre here. We have done this and they are impressed and thanked the government for what they have done.”

He pointed out that companies operating within the FTZs source their foreign exchange in the open market unlike other companies that get foreign exchange through the Central Bank of Nigeria (CBN).